In a strategic move to strengthen their presence in the retail banking field, Tokai Bank and Asahi Bank, both among the nation’s nine major city, or commercial, banks, reached a comprehensive tieup agreement Monday to consolidate their branch offices and jointly develop financial products.

The two are also considering forming a financial holding company in which to combine their operations, the presidents of the two banks said.

The deal, which includes a cross-shareholding arrangement, will complement both banks’ retail operations, because Asahi’s branch offices mainly cover the Tokyo metropolitan area while those of Nagoya-based Tokai maintain a strong foothold in central Japan.

“We agreed we had best concentrate on our retail banking business for small firms and individual customers as we cooperate in other fields,” Tatsuro Ito, president of Asahi Bank, told a news conference. “With this common strategy, we can increase our cost-competitiveness in times of financial deregulations.”

Tokai Bank President Hideo Ogasawara said that, compared with other forms of business alliances such as mergers, a broad-based tieup was a better step for the two banks in terms of time and costs. Under the deal, Asahi and Tokai will consider increasing their mutual share stakes. Asahi and Tokai each own 0.7 percent of each other, Ogasawara said.

The two banks are keen on creating a new high-risk, high-return pension program modeled after the U.S. 401(K) program, which is likely to be introduced later in Japan after the government lifts a ban on such programs as a means to revitalize the stock market.

In the tieup, the banks will concentrate their sales resources by using a common sales strategy and consolidating branch offices seen overlapping in the same business areas.

Subsidiaries of the two banks will be expected to cooperate, and some of those specializing in the securities and trust business will be consolidated, they said.

To increase operational efficiency, Asahi and Tokai will develop common operating systems that, along with ongoing corporate restructuring at the two banks, will probably add up to a 50 billion yen reduction in operational costs, they said.

Tokai Bank, with total assets of 31.94 trillion yen, ranks seventh among Japan’s nine largest city banks, while Asahi Bank, with total assets of 29.26 trillion yen, ranks eighth.

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